Sunday, January 28, 2018
9:22:48 PM EDT

Back from the Dead

by
Jim Brown

HP Inc. provides products, technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health, and education sectors worldwide. It operates through Personal Systems and Printing segments. The Personal Systems segment offers commercial personal computers (PCs), consumer PCs, workstations, thin clients, commercial tablets and mobility devices, retail point-of-sale systems, displays and other related accessories, software, support, and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions, and services, as well as scanning devices; and laserJet and enterprise, inkjet and printing, graphics, and 3D printing solutions. The company was formerly known as Hewlett-Packard Company and changed its name to HP Inc. in October 2015. HP Inc. was founded in 1939 and is headquartered in Palo Alto, California. Company description from FinViz.com.

Expected earnings February 20th.

Hewlett Packard, now HP Inc, saw its shares crash back to $9 in 2016 as Lenovo cornered the cheap laptop market and consumers were moving away from desktop PCs. That was a lifetime ago in the tech world. Since that cycle low, HP has reinvigorated itself and changed its business model. The company no longer competes in the cheap computer market. HP now sells top end PCs to compete with the Apple Macs and fully features Dell workstations.

The reinventing of HP has worked. According to IDC, HP's market share rose from 21,8% to 23.5% in the last quarter. Only three companies, HP, Dell and Apple, saw shipments rise in Q4. HP shipments rose 8.3% to 16.6 million, Apple shipped 7.3% more to 5.8 million and Dell barely made the list with a 0.7% rise to 11.1 million. Total PC shipments rose only 0.7% in the quarter, showing how dominant HP was in stealing market share. That was the first quarter where overall PC sales have risen in the last six years. The PC is coming back to life.

HP's PC revenue rose 13% in 2017 to $9.1 billion with total shipments rising 6%. That was after a 12% rise in revenue in the prior quarter. Notebook revenues rose 16% on a 8% increase in shipments.

The printer business is also coming back from the dead. Printers generated 65% of the revenue and 30% of earnings. HP is buying Samsung's printer unit, which will expand the product line in multiple directions including mobile printers and 3D printers. The company is poised to announce a new 3D printer that prints metal components in 2018.

The company is expected to grow earnings 10% in 2018 with a 4% increase in revenue. Compared to other tech companies their PE of 13 is positively ridiculous when most companies are in the 203. 30s or even 100s.

HP shares are about to break out to an 8 year high over $25. This should trigger additional buying because everyone wants to own a winner.

Buy Jan 2019 $25 call, currently $2.13. No initial stop loss.

If you like the trade setups you have been receiving and you are on a free trial then now is the time to subscribe. Don't wait until you miss a newsletter to decide you want to take the plunge.